Two more publicly traded oil and natural gas companies, with combined debts of more than $5.8 billion, filed for chapter 11 bankruptcy protection in Texas as the industry continues to suffer amid stubbornly low prices.
Houston’s Ultra Petroleum Corp. and Oklahoma-based Midstates Petroleum Co. separately filed for court protection in U.S. Bankruptcy Court in Houston.
Ultra, which has some $3.8 billion in debt—all of it unsecured—filed for bankruptcy Friday after failing to reach a debt-restructuring deal with its lenders and bondholders, according to an affidavit filed by Chief Financial Officer Garland R. Shaw.
Like many of its peers, a heavy debt load and falling commodities prices pushed Ultra into bankruptcy protection, Mr. Shaw said. While the bulk of Ultra’s bonds were issued “under favorable and supportive market conditions,” the collapse in oil and gas prices since late 2014 made the debt load too much to bear for the oil and gas company, he said.
Ultra, with 159 full-time employees, operates mainly in Wyoming’s Pinedale Field, which produces natural gas. The company also owns properties in Utah, which produce primarily crude oil, and Pennsylvania, which produce natural gas.
Midstates, meanwhile, filed for bankruptcy Saturday after reaching a preliminary deal with its lenders and bondholders on the terms of a $2 billion debt-for-equity swap. The company plans to reduce its funded debt load 90% by handing more than 96% ownership of the company to junior bondholders owed $625 million, in exchange for forgiveness of that debt. That group of junior bondholders also will be entitled to as much as $60 million in cash.
Lenders owed $249.2 million are being paid $82 million in cash and have agreed to provide a $170 million exit facility to Midstates. Lower ranking debtholders are slated to have their debts wiped away and be paid with the remaining small equity stakes. The agreement already has broad support from these creditor groups.
Midstates was founded in 1993 as an onshore Gulf Coast driller and now focuses on hydraulic fracturing of natural gas formations. Leading up to its bankruptcy filing, Midstates attempted to increase liquidity with fresh debt offerings and bond exchanges, but it wasn’t enough to allow the company to weather these commodity prices.
Last month, Midstates skipped a payment to its bondholders, triggering negotiations with its lenders and bondholders that resulted in its bankruptcy filing.
Both companies, in court filings, pointed to persistently low commodity prices as the reason for their financial woes. Natural gas prices have been depressed for years and prices for crude have undergone a similarly steep decline, according to Nelson M. Haight, Midstates’ financial chief.
Although benchmark U.S. oil prices have rebounded to around $46 a barrel since hitting a 13-year low in February, they’re still well below the $100 per barrel producers were getting as recently as the summer of 2014.
Midstates and Ultra join a host of other oil and gas companies experiencing financial distress. Many have already filed for bankruptcy, and more are expected to this year. Sixty-seven oil and gas exploration and production companies filed bankruptcy proceedings last year, a 380% increase from 2014, according to consulting firm Gavin/Solmonese.
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